Venture Capitalist Acquired OnLive for $4.8 Million

Leading Cloud Video Game Streaming Service Was Bought for a Fraction of Cost

by Anton Shilov
10/10/2012 | 11:56 PM

Just weeks after Sony Corp. paid $380 million for Gaikai, a leading cloud video game streaming service, Lauder Partners acquired the remaining of OnLive, Gaikai's arch-rival, for only $4.8 million. Apparently, the company owed around $18.7 million to different partners and the insolvency administrator said that he could not find a better deal than to sell the assets of OnLive to Lauder Partners.

 

OnLive service was announced in the first half of 2009 after many years of work on various technologies supporting streaming of video games from remote servers to almost any device connected to the Internet. Over the years, OnLive secured tens of millions of dollars from various investors, including Warner Bros., Autodesk, Maverick Capital, AT&T Media Holdings, Lauder Partners, British Telecom and Belgacom. However, this year the company failed to secure additional round of financing and failed to sell itself to a strategic partner. As a result, the insolvency assignee had to act quickly.

"Had the sale to the buyer not taken place, the assignee would have been left with inadequate capital to fund the significant costs to preserve and market OnLive's patents and other intellectual property, thus greatly reducing expected recoveries essentially to those of a forced piecemeal auction," noted Joel Weinberg, the CEO of Insolvency Services Group, which was handling OnLive's bankruptcy-like process, in a letter obtained by Mercury News.

In mid-August OnLive fired all of its staff and filed an alternative to bankruptcy, a status that provides companies in financial trouble a level of protection from creditors. The company did not shut down its services as it believed in eventual prosperity. The staff reportedly started to blame former chief executive of OnLive for not selling the business, like competing Gaikai video game streaming service, to a big company or a strategic investor. It could provide the funds necessary to continue enhancing the data centers needed to operate the video games streaming services.

Gary Lauder, venture capitalist behind Lauder Partners, started a new company with the same name, bought the assets for $4.8 million, kept the game service up and running and offered to hire back nearly half of the defunct company's workers. In addition, the new owner renegotiated the debts with creditors and the company is now healthier than before.

"When planned financing didn't work out, the company was left with few options. Transitioning through this unexpected event has not been easy, but it has left the company much healthier," a spokesperson for OnLive told Mercury News.